USD/CAD recovery fades near 1.3550 despite softer Oil price, First Republic, US/Canada data eyed

• USD/CAD eases from intraday high as market players seek more clues to extend week-start moves.
• Cautious mood ahead of First Republic announcements, US/Canada jobs report prod buyers.
• Oil price ease amid broad US Dollar gains, recession woes.
• Fed’s 0.25% rate hike is given but clues for future moves will be the key for near-term Loonie moves.

USD/CAD seesaws around 1.3550-60 during the first positive day in three early Monday. In doing so, the Loonie pair cheers recent weakness in WTI crude oil price amid the US Dollar’s strength due to the risk-off mood. However, cautious mood ahead of the key US and Canadian statistics prod the Loonie pair buyers.

WTI crude oil snaps two-day uptrend as sellers approach the $76.00, fading the last week’s bounce off April’s low. In doing so, the black gold bears the burden of the US Dollar’s broad run-up amid sour sentiment and recently hawkish Fed bets.

That said, the US Dollar Index (DXY) renews intraday high near 101.80 during three-day uptrend as market players cheer recently firmer US data while also rushing towards the greenback on fears emanating from the First Republic Bank.

During the weekend, the Federal Deposit Insurance Corporation (FDIC) called in bids for the troubled US bank in which multiple top-tier private organizations, including JP Morgan, took part. The results are up for release and can give only knee-jerk optimism as an immediate defense of the bank by a private player isn’t a solution to the broad banking problems.

Talking about the US data, first readings of the US Gross Domestic Product (GDP) for the first quarter (Q1) of 2023, also known as Advance readings, marked mixed outcomes. That said, the headline US GDP Annualized eased to 1.1% from 2.0% expected and 2.6% prior but the GDP Price Index inched higher to 4.0% on an annualized basis from 3.9% prior and 3.8% market consensus. Further, the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, for March matched 0.3% market forecasts and prior to MoM but rose to 4.6% from 4.5% expected on YoY, with an upwardly revised previous reading of 4.7%. On the same line, the US Employment Cost Index also increased by 1.2% in Q1 2023, versus the 1% increase marked previously.

On the other hand, dovish bias surrounding the Bank of Canada (BoC) and an absence of major Canadian data in the last week allowed the USD/CAD buyers to keep the reins.

Against this backdrop, the CME Group FedWatch Tool suggests higher odds of the Fed’s 0.25% rate hike in May and June, as well as a reduction in the market’s bets on the September rate cut from the US central bank. With this, S&P 500 Futures print mild losses even as Wall Street closed positive and the yields eased.

Looking forward, Canada S&P Global Manufacturing PMI and US ISM Manufacturing PMI for April may entertain intraday traders of the USD/CAD pair, together with the First Republic Bank news. However, major attention will be given to Wednesday’s Federal Reserve (Fed) monetary policy meeting and Friday’s employment data from the US and Canada for clear directions.

Technical analysis

USD/CAD pair’s latest rebound could be linked to its inability to break the 100-DMA support of around 1.3525. However, the Loonie pair buyers need validation from the 50-DMA hurdle surrounding 1.3590 to retake control.